Josh Henry, Author at Simplifychurch.com

June 8, 2018January 5, 2021

Four Dangers of Designated Giving

If you’ve been around church long enough you’ve for sure heard about designated giving. Like many things it is one of those areas where hear-say and old stories have skewed how and why churches have designated gifts. If we’re not careful, we can run into many of the dangers of designated giving and it will distract us from our main mission, reaching the lost.

Similarly, many churches that have been around for any amount of time over a few years may have designated gifts that no one currently really knows what they are for.

While the IRS make it pretty clear how not for profits should handle designated gifts, and they also provide info on the types of designations gifts can have, we’ll focus more on the dangers designated giving can have for your church.

Now, before I get run out of town, there are some instances where designated giving is acceptable. After we talk about the dangers, we can discuss where it may be appropriate.

Designated Giving Danger #1

Your church can be designated broke!

There are types of designations that donors can place on their funds, but one thing remains the same, if the donor has designated their gift, it CANNOT be used for anything else.

You can see the danger here, if a donor designates money towards something; let’s say, flowers for the pulpit, and you have no desire to put flowers on the pulpit, then you’re kind of out of luck with that bank balance.

We have churches that have been around for a long time that have old designated funds where they’re not really sure what the original intent of the fund was. In some cases, the donors and people who set it up are either gone from the church or deceased, so there’s really no way to find out. In any case, that money is tied up by designation.

The only way to get designated money undesignated is by approval of the donor.

Designated Giving Danger #2

Your church is setup for ministry silos

Designated giving is also a killer of church unity.

When people are able to designate their giving, it opens the door for people to dictate their ideas through their giving.

Let’s say pastor that someone in the church gets upset with something you said or a way you handled a certain situation. It wasn’t bad enough for them to leave the church, but just out of spite, they’re going to show their dissatisfaction by donating their tithes now to the youth department.

While in some ways that may not seem bad, heck, the youth need money too, it still reveals a huge issue with church health.

If people can dictate through their giving, it’s a sign of an unhealthy church.

Designated Giving Danger #3

It can distract from your mission

As humans, it’s easy for us to get distracted by the shiny object syndrome.

In churches, the same thing occurs. We start with a defined mission and vision with a clear pathway. Over time, as things grow, more people get involved and we get busier that vision and path can get blurry and distracted.

Now throw new leaders into the mix that get going. Even the strongest leaders pointing the organization in the right direction can have trouble keeping everyone on the same path. As things keep moving along, distractions happen and side roads creep in.

Sometimes, these side roads seem harmless, just a short-term project but if not handled correctly these will distract from the main goal. Over time, these small distractions become bigger and cause confusion and lack of clarity for the organization.

How does designated giving relate here?

Simple, let’s say one of your leaders comes to you with a need in your community. At first that sounds great and probably something we should do. At first, it’s going great and as intended. However, over time, if not kept in check this little side project can get legs of its own and overwhelm your main mission and vision.

Designated Giving Danger #4

It creates unnecessary accounting complexity

This one may seem weird to say as a Church Bookkeeping and Accounting company but its reality. Designated giving sets your church up for undo complexity in your accounting. This also relates back to the previous point as the complexity increases, you can get distracted from your mission.

Churches really have two ways to manage designated funds, and both are fine to do. Some will keep the funds in one bank account and just account for the differences in their software while others create a completely separate bank account to keep the funds distinguished.

Either way is completely acceptable, but both have their inherent dangers.

The first is dangerous because if you have people doing Bank Balance Accounting, they may see the balance of the account and think the church is financially healthy. What they may not realize is that some of that money is tied up for a specific purpose (designation).

The second gets dangerous because now you are adding bank transfers into the mix. Money gets counted and deposited into one account and transferred, or it can get deposited into each. Either way, it gets more complex depending on your method for retrieving that money out of the account(s) to be used.

Here’s the reality.

Our mission is to reach our communities with the good news of Jesus. When we add complexity to secondary issues, it takes away bandwidth to focus on our primary mission.

As an outsourced church bookkeeping company, we’re happy to help manage designated funds, and be that partner, but we’ll also consult about these dangers. Personally, I have not found a reason making designated funds worth the hassle.

Here are a couple solutions for avoiding these dangers of designated giving.

The first will take some courage. The next time someone wants to give with a designation, kindly tell them that the church has a policy of not accepting designated gifts, but they are more than welcome to give to the general offering.

In many cases, you’ll find the donor has no issues with that. Sometimes, they’re giving to designated areas just because that’s what they’ve always done and no one has said anything different.

Secondly, adopt a Kingdom Funding Approach to your church’s budget.

In a Kingdom Funding Approach, you’re in many ways accomplishing the same things as you could with designated giving, but doing so in a healthy manner through good budgeting stewardship.

In KFA, you handle any designations through the budget process. If you want to start a building project, setup a line in your budget for that. If you want to give to missions, put it in the budget as either a percentage or set amount. If the church needs new windows or roof repair, you see where I’m going.

If your budget has proper allocations and is managed correctly, there will be no need for designated funds.

Designated funds are a big issue in many churches and getting away from them will not be an overnight process, especially in an established congregation that has become accustomed to them. However, your ministry will thrive by removing these dangers and unnecessary complexities.

May 17, 2018July 28, 2025

3 Ways to Maintain Ministry Momentum This Summer

With summer just around the corner let’s face it, everything about church for the next few months will slow down. With that in mind, as pastors there are a few things we can do to help maintain ministry momentum this summer.

1. Put on your marketing hat

I know that for most pastors, marketing and advertising is one of the last things you think about. There’s also a good chance that many pastors are either scared of it, don’t know where to start or just blatantly don’t feel the need.

Whether we like it or not, we’re always marketing. Everything we do in some ways takes on a form of marketing.

For this summer, you may need to use some old tricks from broadcasting or newspapers to tease the stories. I’m not talking about fake news or click bait, but come up with some ways to gain excitement about what’s going to happen this summer.

Here’s an idea.

Instead of putting out a schedule of your summer sermon series, perhaps tease it out and create some ‘buzz’ around it. News agencies do this all the time.

“You won’t believe what the Bible says about (insert shocking idea here). Be sure to join us for worship in June to find out more”

There’s a very fine line between engaging and corny so be careful, but having some way to create intrigue around your summer messages will increase involvement and attendance.

2. Embrace Summer

One big way to deal with the summer slump is just to embrace it.

Know that it’s coming and take steps to prepare for it. Your giving will probably be lower than normal. Attendance is going to slow as well. A great way to get through it is to embrace it and plan accordingly.

Talk about it with your team and key leaders. Plan for it.

Look at your recurring subscriptions and bills. Are there any that you can stop for the time being to conserve cash flow over the summer? There’s a good chance your youth may be doing events throughout the summer so their budget will get hit more than others. Be ready for that as the increased expenses there may be above the norm of what you experience each month.

Plan simple inexpensive events for your congregation. Participate in community events, anything that keeps people involved and maintains ministry momentum.

Here’s an idea, if your community has a picnic or other festival, volunteer to host a water tent or cool down tent. Just a place where people at the event can come and take a break. It’s low cost and allows you to be a part of what’s already happening in your community.

3. Over-Communicate What’s going on

Summer schedules get crazy. Use the tools at your disposal to communicate with your church body.

Try Facebook live from worship services. Setup some FB Live broadcasts from your VBS or other events to let people see what they’re missing out on.

(it’s a whole different topic to make sure your events are actually fun!)

Use a social media challenge to encourage engagement. Send out random posts for a scavenger hunt or just have a spur of the moment meeting for coffee or ice cream at the local place. Whatever you can to do encourage engagement and communicate what’s happening throughout the summer will not be a bad investment.

Every church deals with summer and the slow down that comes. These are just a few quick ideas meant to start you thinking about what’s coming. Every church has their own identity and personality so embrace that and run with it. Get your people involved and excited about what they can do to stay focused and reach the community.

What are some ideas you have to avoid the slump and maintain momentum for the summer?
Comment below and let’s keep the conversation going.

April 26, 2018January 5, 2021

Three Misconceptions About Meal Expenses for Churches and Pastors

When I was in the youth group late in high school we had a new youth pastor join our church. He was great and came from a significantly smaller church when he joined us. By smaller I mean the jump in size was fairly significant. Our youth group alone had an average attendance of more than his previous church. Needless to say there were a lot of new things for him.

One of those things was he now had a sizeable ministry expense budget. That line was there for him to be used to expense items that benefited his personal ministry. The funds could be used for books, conference registrations, mileage, and also food for meals with others.

I’ll never forget coming back after a few years of college to have lunch with the pastor and heard his story. He’d put on nearly 25 pounds that he attributed solely to his ministry expense budget.

Now, he was not using that money inappropriately, but at the same time he realized that perhaps eating out consistently may not have been the best use of that budget line.

How does this relate?

As a church bookkeeper, we see the expenses from hundreds of churches across the country and there is definitely a mis-perception that I’d like to address here.

Here’s the question we get asked a lot, Are Meal Expenses Limited for Churches and Church Staff?

Here are three misconceptions about using ministry funds for eating out.

1. Meal expenses are handled much the same as they would in a for profit business.

We see churches and pastors all the time using the church funds at Starbucks several times per week. We see pastors buying lunch out several times per week. While it would seem that there is a justification to use the church funds when working from the local Starbucks, unfortunately, that is not the case.

Much like in a business, meals can only be expensed when they serve a legitimate business purpose, and that purpose needs to be documented.

The measure here is to ask “What would a reasonable person say?”

If a pastor takes the staff out to lunch several times throughout the week and pays for everyone on the church’s card, a reasonable person may say that is abusive.

“But we need to eat” you may say.

While that is true, that meeting could have just as easily been pushed a couple hours before or after lunch and not required the meal to happen.

In a for profit business that files tax returns, the owner can only expense 50% of meals anyway. This is due to the fact that the IRS will claim that half of the meal was for the owner and therefore not able to be expensed.

In the case of Wells v. Commissioner, Docket No. 6088-76, 1977 Tax Ct. Memo LEXIS 22 (U.S. T.C. Dec. 7, 1977), the meals of attorneys who met monthly for lunch were considered too frequent to be business-related expenses.

While frequency is not defined, what was deemed here was meeting with the same people, frequently could not be considered a business related expense.

2. Using church funds for personal meals and coffee is inappropriate

We work with many churches that don’t have a physical office or location. Throughout the week pastor will work from a local coffee shop or other location. It can be tempting to get a cup of coffee and use the church’s card to pay for it. It’s easy to justify and say that you’re doing church business and therefore the church should cover that expense.

Unfortunately, that is not the case.

The IRS makes it very clear how to handle meals & entertainment expenses and does not provide any distinction between for profit and nonprofit entities.

There are some ways that a church can put an Accountable Reimbursement Plan in place which would give guidance and direction and provide some assistance to the pastor. Unfortunately, without this plan the IRS would deem this use of funds to be a benefit provided to the pastor and therefore taxable as personal income.

3. Remember, we’re called to be good stewards.

This is a very sticky issue and I’ll admit there is some grey area in the discussion.

I always will contend for churches in areas where the answer is grey that we hold ourselves to a higher standard. Just because something can be justified doesn’t make it right. Many churches are already under scrutiny so why would we voluntarily enter into situations to increase that?

Something that a previous pastor I worked for told me when stewarding and making decisions about church funds was to keep my grandma in mind. My grandma lived for many years on her Social Security income so needless to say she was not rich. However, she was a faithful tither. She made sacrifices to faithfully give and we needed to hold her sacrifice in regard when it came to using church resources.

Another way to think about it is to ask what your average church member would think. Now I’ll admit many in the church want pastors to live on peanuts and they want to go cheap. I get it. However, can you justify your expenses to the average church member? If you showed them the amount of money or percentage of budget that was spent on staff meals would they deem that as appropriate?

Now some churches have taken that too far and become cheap. I’m not advocating for hoarding and not using funds for ministry, but rather using those funds to further the ministry.

Unfortunately, the ramifications here are extreme. IRS field agents are given the authority to deem what they think is excessive or inappropriate. The fines and penalties enough should prevent us but you may also be putting your church’s nonprofit status in jeopardy. It’s really not worth it for a $3 cup of coffee.

Now this post is not intended to be an exhaustive comment on this situation and there is much more that could be said. If you want to dive deeper, comment below and we can discuss more.

If you need help in these areas or putting together a financial system that better tracks and manages your expenses let us know. We’re here to simplify so you can do ministry better.

March 15, 2018

Scheduled Maintenance – 3/16/2018

We will have a period of scheduled maintenance for the Simplify Church Bookkeeping Portal on Friday, March 16, 2018 from 7:00-8:00pm CST.

During this time, the portal may be unavailable so please plan accordingly.

This update will allow us to begin the process of having online donations processed through our new Online Giving System, SimplifyGive.com automatically sync as a deposit and donor record for your church.

Stay tuned for more updates and thanks in advance for your patience during this time while we make continual improvements to better serve your church.

February 14, 2018

[portal maintenance] Feb 13, 2018 Server Upgrades

There may be some brief periods where the portal is temporarily unavailable between 11-12pm CST on Tuesday February 13, 2018.

We are upgrading the servers to provide more speed, functionality and reliability to serve your ministry. This will also allow us time to upgrade a few items to prepare for some new features that will be released in the next few months.

Sorry for any inconvenience but the time should be very short where the Portal is unavailable.

January 3, 2018

December 2017 Portal Update [Video}

Check out what we just released in this video update.

This December update to the Simplify Church Bookkeeping Software Portal includes:

Merge Contributors
We are now able to merge contributors in the portal. Perhaps a husband and wife gave separately but want their giving statement combined at the year end, we can now do that. Also, if someone was added as a duplicate in error we can update and merge each into one contributor. Ask your account manager for more details.

Email Statements
With this update we can now email the statements at year end. Statements can be sent to an individual via email or as a bulk send to all contributors that have an email address in the system. To update your contributors and add an email address, open your contributor list in the portal and select the pencil icon to the right of each name. You’ll see a new field for email address now exists.

The email will be sent with your church’s name as the sender name and you can add your pastor’s letter as the body of the email.

Church contributions are always getting easier to manage with Simplify Church.

October 19, 2017January 5, 2021

Are Pastor Appreciation Gifts Taxable by the IRS?

We all know that pastors don’t serve in their position for the money.

(well most anyways, but I won’t touch that debate today)

Most pastors serve long, stressful hours in an often thankless job. Much of their work happens behind the scenes and away from the public eye and by its very nature often goes unrecognized.

The fact of the matter though is that pastors deserve to be appreciated.

For many of us, that appreciation is shown through gifts which is great and appreciated. However, are Pastor Appreciation Gifts Taxable by the IRS? Here are some quick tips on how to determine.

Pastor Appreciation Gift Tip #1

Since the pastor will most likely be considered an employee, any non-reimbursement payments to them will be considered taxable income. This would include cash, checks or gift cards. Monies designated by church members directly for the pastor as well may not classified as a tax deductible donation either. See our post on How To Handle Pastor Appreciation Gifts for more info.

Pastor Appreciation Gift Tip #2

Gift Cards are always taxable to the pastor. Regardless of the amount, since gift card has a defined cash equivilent, they will be taxable as a gift to the pastor. Many churches will seek this option to avoid tax, but if ever audited they will be surprised.

Pastor Appreciation Gift Tip #3

There are gifts that would be considered non-taxable. These may include a gift basket of items, letters, cards, or other items that would be considered a de minimis fringe benefit. The IRS Website has some specific information on De Minimis gifts and make it pretty clear on what does and does not qualify. Basically, it cannot be disguised as wages or be given in any way to avoid taxing, it must be infrequent and the value can be determined as “administratively impractical” to account for.

To conclude, your pastor deserves to be appreciated but keep in mind that there are other considerations that need to be taken into account before you determine your pastor appreciation gift. Appreciate your pastor, but do so in a way that blesses him and let’s him know that you are thankful for the time and effort he puts in.

October 18, 2017January 5, 2021

How To Handle Pastor Appreciation Gifts

When I first felt the calling to ministry, I actually had a pastor who did his best to talk me out of it. He shared his experiences with isolation, long hours and times when he wanted to give up.

At first I was shocked. Why is this man who is serving the Lord trying to talk me out of being a pastor?

Why is this man who is serving the Lord trying to talk me out of being a pastor?

I quickly realized he wasn’t really trying to talk me out of it, but testing my calling and really forcing me to wrestle and pray through the decision of going into full time ministry.

I took the plunge and haven’t looked back. Now I don’t serve in a traditional capacity as a pastor, preaching and leading a church each weekend, but rather a role supporting pastors and freeing them up to be better focused on what they do best … Ministry.

Your pastor probably shares a similar experience. He may be all smiles and joy on Sunday morning, but truth be told, there is a war waging inside of him.

He’s not showing the late night he spent last week when he was called to the hospital in the middle of the night.

He’s not showing the hurtful words that a member shared with him about how he’s handling the church.

He’s not showing the stress put on him by the finance team giving him direction, but not providing him any input to the matter.

He’s not showing the stress from home as his wife and children realize they often take a second seat to his role as pastor.

These are the things most people don’t realize your pastor is dealing with.

Now that I’ve painted a bleak picture of being a pastor, let me also share that your pastor is probably in the most rewarding position he could be in. While there are times of stress, the position is often the most rewarding and delightful place to be, fully serving God.

So why did I share all those things about your pastor?

Your pastor needs your appreciation.

Most pastors aren’t in their positions for the money or fame. Many could go get secular jobs and not put up with the hassle they often deal with. Your pastor does it for a higher calling.

However, your pastor would still like to be appreciated.

Every year, October is pastor appreciation month a time when most churches are going to provide a pastor appreciation gift. I’ll admit we shouldn’t reserve our appreciation and show only one month, but it’s nice to have a defined time to remind us of what our pastors do for us.

In appreciating your pastor, there are some things to keep in mind that we’ll discuss here. While most people have great intentions in how they show appreciation, there are definitely some guidelines to stay within so you can truly bless him.

Pastor Appreciation Gift Guidelines

For many churches, they want to bless their pastor with a cash gift to show their appreciation. While that is great, here are a few things to keep in mind.

Cash gifts for pastor appreciation are probably taxable income

It’s pretty safe to say that anytime an employer (the church in this case) provides cash or a non-reimbursable payment to the employee (pastor) it is probably taxable income to the receiver. There really are no instances where an employer can provide payment to an employee and have that not taxed.

As a church, maintaining your financial records is crucial on so many levels. Any check or money that is spent needs to be tracked. When that payment is given to an individual in a non-reimbursable payment, it needs to be recorded and handled correctly.

If you are paying pastors straight cash with no record, you’re inviting a whole host of problems should an audit ever occur. There is never a time when someone should be given cash from the church. This also goes for love offerings that are collected. At no time should any part of a collected amount of money be given in cash to an individual.

Church collections for pastor appreciation gifts may not be a tax-deductible donation

Churches often survive on faithful gifts and offerings.

It’s often misunderstood, but in most cases the donor can claim donations to a church as a charitable donation and have that reduce their yearly tax burden. However, in instances where money is given and designated by the donor as to the use of those funds, it opens an entirely new set of circumstances for that donation which may preclude the amount from being deductible.

The IRS has made it fairly clear as to when a donation is deductible or not. The test really goes back to donor intent.

The test here really goes to how much control the organization maintains as to the use of the funds. If the donor gave a gift and “designated” that gift to a specific individual, that gift would not be tax deductible. Those gifts are being treated, in effect, as a gift to the individual.

If the person gave the gift to an organization to a designation where the church maintains control as to the disbursement of that gift, it can be tax deductible.

Here are a few specifics.

If money is collected for the Senior Pastor, and people are giving specifically for that purpose, those monies are probably not tax-deductible.
Here’s a good article to help understand giving designated for an individual in your church.

If there is more than one pastor on staff, and people are giving money to a pot of money that will be distributed by the church among the pastoral staff, that would be a deductible gift.

In both cases, when the money is disbursed to the pastor(s), it would be considered taxable income to them and would need to have appropriate amounts withheld.

What if our pastor is paid as a 1099 Independent Contractor?

This presents a completely different scenario and the church really needs to take a look at the IRS test page as to whether the pastor really qualifies to receive a 1099-Misc. Additionally, for the pastor, he is being over-taxed handling things this way if that is his choice on how to receive compensation.

Are non-cash pastor appreciation gifts to the pastor taxable

Many churches will choose to give gift cards or other non-cash gifts as pastor appreciation gifts.

In this case, the IRS terms those gifts at “De Minimis Fringe Benefits” defined considering its value and frequency are so small that accounting for it would be impractical or unreasonable. IRS page on De Minimis gifts for churches

Two keys here to keep in mind are that these gifts are not to be a way to disguise compensation, they are to be occasional or unusual in frequency and as already ruled by the IRS, should not exceed $100.

However, gift cards cannot be classified as de minimis gifts for the very fact that they have a specific cash value. Because they have a specific value which can be accounted for, any Gift Card pastor appreciation gift would need to be considered a taxable fringe benefit to the pastor. A case could be made for the small monetary value of a Gift Card falling under the guidelines as “impractical or unreasonable” for accounting purposes, but again, since they do have a very specified cash equivalent value, they would be a taxable gift to the individual.

Because they have a specific value which can be accounted for, any Gift Card pastor appreciation gift would need to be considered a taxable fringe benefit to the pastor.

You should appreciate your pastor regardless

Being a pastor is a difficult position and we should always take time to show our appreciation. He’ll definitely appreciate it.

Note: Because your situation may be fact dependent, this is not to be considered tax or legal advice. The intent of this advice is to be general in nature and should not be used as legal advice. Your church should consult a qualified individual with the specific facts of your situation.

September 29, 2017

September 2017 Portal Update [Video]

Check out what we just released in this video update.

This September update to the Simplify Church Bookkeeping Software Portal includes:

Church Metrics
Easily track and manage key metrics for your church.

Role and Permissions updates
We are streamlining the roles and permissions for users. Stay tuned and your Church Account Manager can update on a plan to implement in your system.

Coming Soon!

Contributions Updates
Several updates the contribution and donor management area of software including the ability to Email Contribution Statements.

Online Giving
We’re launching a tool to accept online donations for your church that track directly into the portal. No longer will you need a third party giving platform to manually enter the data from. Our system will streamline this for your church.

Stay tuned for more updates.

August 3, 2017

July 2017 Portal Update [video]

Watch and see what’s now new in the Simplify Church Bookkeeping Portal.

In this update we feature:

Deposit Overview:
The deposit detail screen will now feature an overview bar. This will break down the sub-totals of each deposit by income line, allowing amounts to be verified easier against what is being input.

Expanding Budget Child Lines:
We have updated a feature for Income and Expense requests to now show all child lines in your budget in the drop down selection tool.

Member vs. Non-Member Giving Tracking
If you want to track giving by member vs. non-members, you can now turn on that ability at the organizational level.

Author: Josh Henry